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The NFIB's Small Business Optimism Index rose 3.4 points to 105.1 in December, beating market expectations for a mild decline. The uncertainty subindex continued to retreat, falling another 12 points in December to 86.

Seven out of ten main subcomponents improved on the month, two fell and one remained unchanged. The largest increase was in the share of owners expecting the economy to improve, which rose 16 points to 52% – the highest level since 2002. Notable gains were also recorded in the share of owners believing that now is a good time to expand (up 6 points to 20%) and expectations about higher real sales (up 8 points to 22%).

The net share of businesses planning to increase employment rose 1 point to 19%, reaching its highest level since spring 2023. The share of firms with unfilled job openings fell one point to 35%. Quality of labor concerns held steady, with 19% of business owners identifying this as their top business problem, second behind inflation concerns. The latter remained unchanged at 20%.

The share of firms increasing employee compensation fell 3 points to 29%, while the share of firms planning to do so over the next three months fell 4 points to 24% – reversing much of the outsized increase in the month prior.

Key Implications

Post-election optimism continues to reverberate across the small business community as uncertainty continues to subside. The improvement is visible in the headline NFIB confidence measure, which rose to its highest level in six years and is echoed across several sub-indicators. For instance, the belief that 'now is a good time to expand', and expectations about 'an improvement in the economy' and 'higher real sales' all surged higher at the tail end of 2024.

As last week's payrolls report showed us, the labor market continues to chug along at a healthy clip, and small businesses appear to echo this theme with plans to increase employment trending up recently. That said, it remains to be seen if this will lead to a major improvement in job growth over the near-term as not all indicators are singing to the same tune. Small business job openings have failed to mimic the improvement in employment plans, instead holding flat at a level that's roughly in line with the pre-pandemic period. Additionally, the fact that compensation trends retreated in December suggests that businesses may not be in a major hurry to fill their open positions.

Daily Pivots: (S1) 1.2131; (P) 1.2172; (R1) 1.2244; More...

Intraday bias in GBP/USD remains neutral as consolidations continue above 1.2099 temporary low. While stronger recovery cannot be ruled out, outlook will stay bearish as long as 1.2486 support turned resistance holds. Break of 1.2099 will resume the decline from 1.3433 to 100% projection of 1.3433 to 1.2486 from 1.2810 at 1.1863.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433, and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move.

Dollar is holding steady against its peers in early U.S. trading, with softer-than-expected PPI report failing to trigger significant selling pressure. Market sentiment continues to shift toward the possibility that the Fed might refrain from additional rate cuts in 2025. Fed funds futures are currently pricing in less than 60% probability of a 25bps rate reduction in the first half of the year.

Attention now turns to Tuesday’s U.S. Consumer Price Index (CPI) data, which is anticipated to be a more significant indicator of inflationary trends and policy direction. Currently, the market expects a significant interest rate differential of 200-300 basis points between Fed and ECB by the terminal point of the currency easing cycle. Should domestic inflationary pressures in the US show any signs of resurgence, this differential could skew further toward the higher end of the range, solidifying Dollar strength.

Meanwhile, the Pound continues to bear the brunt of market concerns over the UK's fiscal health. The relentless selloff in UK government bonds drove 10-year Gilt yield to above 4.9%, with a break above 5% psychological barrier appearing increasingly imminent. Such a move could intensify the downward pressure on Sterling, which is already grappling with domestic economic challenges. The UK is bracing for a pivotal week, with CPI data scheduled for Wednesday and GDP figures following on Thursday. These releases could determine whether the Pound can stabilize or face further deterioration.

On the weekly leaderboard, Sterling is the worst performer so far, followed by Yen and Dollar. Kiwi leads the pack with Aussie and Loonie close behind. Euro and Swiss Franc remain in middle positions.

In Europe, at the time of writing, FTSE is down -0.13%. DAX is up 0.83%. CAC is up 0.86%. UK 10-year yield is down -0.004 at 4.887. Germany 10-year yield is up 0022 at 2.617. Earlier in Asia, Nikkei fell -1.83%. Hong Kong HSI rose 1.83%. China Shanghai SSE rose 2.54%. Singapore Strait Times fell -0.08%. Japan 10-year JGB yield rose 0.0319 to 1.244.

US PPI rises 0.2% mom, 3.3% yoy in Dec, miss expectations

US producer prices rose modestly in December, with PPI for final demand increasing by 0.2% mom, falling short of market expectations of 0.3%. The gain was driven primarily by 0.6% mom increase in goods prices, which included a sharp 3.5% rise in energy costs.

In contrast, prices for services remained flat. Excluding the more volatile components of food and energy, core PPI was unchanged for the month, missing the anticipated 0.2% mom increase.

On an annual basis, headline PPI edged higher from 3.0% to 3.3% yoy, narrowly below the forecast of 3.4% yoy. Core PPI, excluding food and energy, rose from 3.4% to 3.5% yoy, also underwhelming expectations of 3.8% yoy.

BoJ’s Himino signals rate hike possible in upcoming meeting

In remarks today, BoJ Deputy Governor Ryozo Himino signaled that a rate hike remains a tangible possibility at the upcoming policy meeting. He said the board "will discuss whether to raise interest rates next week, base its decision on thee projections detailed in the quarterly outlook report.

Himino stated, “When the appropriate timing comes, we must shift policy without delay, as the effect of monetary policy is said to show up with a lag of one to one-and-a-half years.”

The Deputy Governor clarified that BoJ does not rely on a predefined "checklist" for rate decisions. Instead, the board intends to thoroughly analyze the economic outlook and inflation expectations to determine the next steps.

Australian Westpac consumer sentiment dips again, RBA easing unlikely before May

Australia’s Westpac Consumer Sentiment fell -0.7% mom in January, settling at 92.1, reflecting a second consecutive decline. However, Westpac noted a divergence within the data: current conditions sub-indexes weakened, while forward-looking measures were flat or showed slight gains.

RBA faces a mixed picture as it prepares for its next policy meeting on February 17–18. While the central bank appears increasingly confident about bringing inflation back within its 2–3% target range, labor market “stopped easing” in the latter half of 2024 and subdued consumer surveys highlighted “mixed signals”.

According to Westpac, RBA is likely to keep interest rates unchanged in February, with an easing cycle more probable to commence in May.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2131; (P) 1.2172; (R1) 1.2244; More...

Intraday bias in GBP/USD remains neutral as consolidations continue above 1.2099 temporary low. While stronger recovery cannot be ruled out, outlook will stay bearish as long as 1.2486 support turned resistance holds. Break of 1.2099 will resume the decline from 1.3433 to 100% projection of 1.3433 to 1.2486 from 1.2810 at 1.1863.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433, and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move.

US producer prices rose modestly in December, with PPI for final demand increasing by 0.2% mom, falling short of market expectations of 0.3%. The gain was driven primarily by 0.6% mom increase in goods prices, which included a sharp 3.5% rise in energy costs.

In contrast, prices for services remained flat. Excluding the more volatile components of food and energy, core PPI was unchanged for the month, missing the anticipated 0.2% mom increase.

On an annual basis, headline PPI edged higher from 3.0% to 3.3% yoy, narrowly below the forecast of 3.4% yoy. Core PPI, excluding food and energy, rose from 3.4% to 3.5% yoy, also underwhelming expectations of 3.8% yoy.

Full US PPI release here.

• The US Dollar Index (DXY) is awaiting US inflation data (PPI and CPI), with PPI data releasing on Tuesday, January 14, and CPI on Wednesday, January 15.
• Tariff rumors from the Trump team have caused a pause in the US Dollar’s rise.
• Key support for the DXY is at 109.57, with resistance at 110.00; a break above 110.00 could signal a move towards 111.00.

The US Dollar Index (DXY) has retreated from the psychological 110.00 handle as markets await the US inflation report due on Wednesday. Later today however, markets will get a glimpse of producer price inflation data which could set the tone for the growing 2025 inflation conundrum.

Currency Strength Chart: Strongest – NZD, AUD, CHF, EUR, GBP, CAD, JPY, USD – Weakest

Source: FinancialJuice (click to enlarge)

‘Incremental Tariff Chatter’ Leads to US Dollar Pause

The US Dollar started the week on the offensive following blockbuster payroll data on Friday. However, late in the US session rumors began to swirl that the Trump team is assessing gradual tariffs to combat the potential rise in inflation.

On Monday evening, Bloomberg reported citing sources that Donald Trump’s top economic advisers are considering slowly increasing tariffs to strengthen their negotiating position and avoid sudden inflation. A proposal being discussed involves raising tariffs by 2%-5% each month using emergency powers.

The advisers involved include Scott Bessent, nominated for Treasury Secretary, Kevin Hassett, expected to lead the National Economic Council, and Stephen Miran, chosen to head the Council of Economic Advisers. The plan has not yet been presented to Trump, showing that the idea is still in its early stages.

The news was enough however to lead a brief recovery in US stocks and lead the US Dollar Index (DXY) away from the psychological 110.00 handle.

Tariff concerns continue to support the US Dollar as fears mount around the impact it will have on US inflation. Such a move, if confirmed by incoming President Trump could pave the way for a slightly weaker US Dollar in the short-term.

When are the US PPI and CPI Data releases?

This week will no doubt be dominated by the US PPI and CPI data releases for the month of December.

The PPI data will be released at 13h30 (GMT Time) on Tuesday, January 14 with the CPI following at the same time on Wednesday, January 15.

PPI and CPI Data in Focus

Following the US jobs report it is critical that today’s PPI data does not show significant signs of an uptick in price pressures. Increasing PPI data usually precedes a jump in consumer price inflation (CPI).

An increase prior to the impacts of potential Tariffs could send the US Dollar marching higher.

I do expect headline PPI data to come out in line with estimates but a slight uptick in core PPI (MoM) from 0.2% to 0.3% for the month of December.

Looking toward Wednesday’s CPI release, I could see a slightly milder than expected print. Markets are expecting prices to have increased 0.4% MoM but I would not be surprised with a print of 0.3%.

A slightly milder CPI print may provide some resistance to the US Dollar Index rally but this may prove to be short-lived.

There are also a couple of Fed speakers today and tomorrow which could add some extra volatility to markets. Later today we have Fed policymakers John Williams speaking at 20h00 (GMT Time) and Thomas Barkin speaking tomorrow at 13h00 (GMT Time), just before the CPI release. 

Technical Analysis

US Dollar Index (DXY)

The US Dollar index daily chart has run into a key area around the 110.00 psychological level.

Yesterday tariff news coicided with a tap into the 110.00 which was met by some selling pressure and potential profit taking which also contributed to the indexes slide.

The daily candle closed as a shooting star candle which hints at further downside. We have seen a brief attempt to push lower today met by buying pressure which is a sign of the bullish momentum currently in play. This is further backed up the golden cross pattern that is forming as the 100-day MA crosses above the 200-day MA.

For now though, price is resting on support at 109.57 with a break lower likely to bring the ascending trendline into play and support at 108.49.

A move higher here for the DXY and 110.00 needs to be cleared with a daily candle close above the level a sign of acceptance. Should this occur then a run toward the 111.00 handle may be on the cards for the index.

US Dollar Index (DXY) Daily Chart, January 14, 2025

Source: TradingView.com (click to enlarge)

Support

• 109.57
• 108.49
• 108.00

Resistance

• 110.00
• 111.00
• 111.50

• The recent three-week slide in the Nasdaq 100 has almost wiped out its post-US presidential gains.
• The persistent uptrend of the 10-year US Treasury yield has made US equities unattractive and overvalued as measured by the S&P 500 Shiller excess CAPE yield.
• 20,790 remains the key downside trigger level for the Nasdaq 100.

Since our last publication, the Nasdaq 100’s price movements have failed to surpass its current fresh all-time high printed on 16 December 2024 and inched downward to challenge the key medium-term bearish trigger level of 20,790 on last Friday, and Monday, 13 January.

It printed an intraday low of 20,538 before it rebounded and closed at 20,784 at the end of the US session on Monday.  The Nasdaq 100 has declined by 6% from its current all-time high level on 16 December last year which almost wiped out close to three-quarters of its ex-post US presidential election gains.

Finally, the bond vigilantes have evoked their “mightiness” on the US stock market where the higher long-term cost of borrowings via the relentless uptrend seen in the 10-year US Treasury yield increased the fear of lesser net profit margins that override the positive aspects of the incoming Trump administration’s deregulation and steep corporate tax cut policies.

Tighter liquidity translates into higher opportunity costs for holding US equities

Fig 1: S&P 500 Shiller excess CAPE yield with S&P 500 as of 13 Jan 2025 (Source: MacroMicro, click to enlarge chart)

The S&P 500 Shiller excess CAPE yield is calculated by the S&P real earnings yield (inverse of CAPE) subtracted by the 10-year US Treasury real yield which represents a gauge of the real excess earnings return of the S&P 500 relative to the yield of a long-term US Treasury bond.

The excess CAPE yield has been declining steadily since September last year from 1.94 to a current value of 1.10 in January which implies that the S&P 500 is overpriced versus US Treasury bonds (see Fig 1).

A further decline in the excess CAPE yield is likely to make it harder to justify investing in risk assets such as equities as opportunity costs increase relatively unless growth continues to be a high conviction theme play. Also, a higher 10-year US Treasury yield tends to have a tightening effect on the economy which in turn reflects generally tighter monetary policy and liquidity conditions.

Longer-term market breadth has deteriorated

Fig 2: Percentage of Nasdaq 100 component stocks above 200-day moving averages as of 13 Jan 2025 (Source: TradingView, click to enlarge chart)

Right now, the percentage of Nasdaq 100 component stocks trading above their respective key long-term 200-day moving averages has plummeted from its ex-post US presidential election peak of 70% on 4 December 2024 to 53% as of Monday, 13 January (see Fig 2).

This set of weak market breadth indicator of the Nasdaq 100 does not bode well for its major uptrend phase in place since October 2022 as the Nasdaq 100 is still holding above its 200-day moving average since late January 2023 while its internals (component stocks) have weakened in strength.

Bearish medium-term momentum

Fig 3: Nasdaq 100 CFD major & medium-term trends as of 14 Jan 2025 (Source: TradingView, click to enlarge chart)

Since 24 December 2024, the daily RSI momentum indicator of the Nasdaq 100 CFD Index (a proxy of Nasdaq 100 E-mini futures) has continued to shape a series of “lower highs and lower lows” and has not reached its oversold region.

This observation suggests medium-term bearish momentum remains intact. Watch the key 20,790 intermediate support, and a daily close below it may trigger a multi-week corrective decline sequence to expose the medium-term supports of 19,840 and 18,310 in the first step (see Fig 3).

However, clearance above the 22,470/980 medium-term pivotal resistance zone invalidates the bearish scenario for the continuation of its impulsive upmove sequence for the next medium-term resistances to come in at 23,980/24,440 and 25,080/570.

The Australian dollar is showing little movement on Tuesday. In the European session, AUD/USD is trading at 0.6174, down 0.06% at the time of writing.

Australian consumer sentiment declines for second straight month

The Australian consumer remains pessimistic about the economic outlook. The Westpac consumer sentiment index fell 0.7% in January from -2% in December 2024. This brought the index down to 92.1 in January, down from 92.8 a month earlier.

The Westpac report found that confidence over employment has been falling and interestingly, a majority of consumers expect interest rates to move higher, despite signals that the Reserve Bank of Australia’s first rate move will be a cut rather than a hike. The RBA hasn’t moved on rates in over a year and the current cash rate of 4.25% continues to squeeze businesses and consumers. Australia releases third-quarter inflation on Jan. 29 and the central bank will be watching. That inflation reading could result in a historic rate cut if inflation is lower than expected.

We’ll get a look at the US Producer Price Index later today, with mixed numbers expected. PPI is projected to jump from 3.0% to 3.4% y/y while decreasing monthly from 0.4% to 0.3%. Core PPI and is expected to jump to 3.8% y/y from 3.4% and from 0.2% to 03% m/m. If the PPI report indicates an acceleration as is expected, the money markets will likely lower their expectations for a rate cut. Currently, the money markets have priced in a quarter-point cut at the Jan. 29 meeting at below 3% and at the March meeting at around 20%. Federal Reserve members are sounding hawkish and have signaled that the market shouldn’t expect a rate cut anytime soon.

AUD/USD Technical

• AUD/USD tested resistance at 0.6193 earlier. Above, there is resistance at 0.6209
• 0.6162 and 0.6146 are providing support

In this technical article we’re going to take a look at the Elliott Wave charts charts of Ethereum ETHUSD published in members area of the website. As our members know, we generally favor the long side in cryptos, which have recently offered good trading opportunities. However, ETHUSD can be still correcting the cycle from the August low and is not yet ready for buying at this stage. In the following text, we will explain the Elliott Wave forecast.

Ethereum ETHUSD 1h Hour Elliott Wave Analysis 01.05.2025.

Currently, ETHUSD is correcting the cycle from the 4111.3 high. The Elliott Wave view suggests that the recovery is unfolding as Zig Zag Pattern. When we analyze the lower time frames, we can observe that the inner subdivisions of waves A and B (red) exhibit 5-wave patterns, with wave B ending as a sideways triangle. The (X) connector is approaching the 0.618 Fibonacci retracement level. We believe the (X) connector should ideally end around the 3717.7-3885.1 area. We recommend that our members avoid buying at this stage.

Ethereum ETHUSD 1h Hour Elliott Wave Analysis 01.07.2025.

The current view suggests the (X) connector may have ended at the 3477 peak. As long as the price stays below that level, we expect to see further weakness.

Ethereum ETHUSD 1h Hour Elliott Wave Analysis 01.10.2025.

The 3744 peak held well, and we saw further separation from that high as expected. The crypto made a decent drop, forming a clear 5-wave pattern from the 3744 high. We expect to see a 3-wave bounce in red wave B before the further decline continues, ideally toward new lows. ETHUSD can target the 2713 area, as long as the pivot at the 3744 high holds. Overall, the view remains bullish. So .we don’t favor selling and would wait for an extreme zone to be reached before looking to buy again.

Market Picture

As of Tuesday morning, the cryptocurrency market had increased 2.6% over the past 24 hours to reach $3.31 trillion. The previous evening, its capitalisation was down to $3.14 trillion—its lowest in three and a half weeks.

The Crypto Market Sentiment Index rose 2 points on the day to 63, advancing after Friday’s drop to 50 – exactly midway between fear and greed. The index has been drifting downward since late November, but the drop late last week may well have been the bottom for the market.

Bitcoin briefly slipped to $89,000 on Monday for the first time since 18 November. This was a liquidation of ‘weak’ long positions by the start of active U.S. trading. Stock markets then recovered, and bitcoin reversed to the upside. Aside from a brief slip to the downside, bitcoin generally held within a consolidation, quickly returning to the $94,000 area. On Tuesday morning, the first cryptocurrency’s rise continues, bringing the price to $95,500.

Despite the prolonged correction, this is still a bull market where it is preferable to look for buying dips rather than selling highs.

News Background

According to CoinShares, global crypto fund investments rose by $48 million last week. Overall, changes in inflows over the past three weeks have been small. Bitcoin investments were up $214 million, XRP was up $41 million, Solana was up $15 million, and Ethereum was down $256 million.

Another recalculation saw the first cryptocurrency’s mining difficulty increase by 0.61%, updating the record at 110.45 T. The average hash rate for the period since the previous value change was 804.05 EH/s.

Tether is ‘completing all formalities’ to move to El Salvador after successfully obtaining a digital asset service provider licence as a stablecoin issuer. Tether is currently registered in the British Virgin Islands.

MicroStrategy bought an additional 2,530 BTC for $243 million last week at an average price of $95.972 per coin. The company holds 450,000 BTC on its balance sheet, purchased for a combined $28.2 billion at an average price of $62.691.

According to Bloomberg, the Trump administration is considering candidates for a cryptocurrency advisory board from among the CEOs of key companies in the industry. The council is expected to begin work in late January.

Daily Pivots: (S1) 190.57; (P) 191.67; (R1) 193.27; More...

Intraday bias in GBP/JPY is turned neutral with current recovery. Rebound from 188.07 could have completed at 198.94 already. Risk will stay on the downside as long as 194.18 support turned resistance holds. Below 190.06 will target 188.07 support. Firm break there will argue that corrective pattern from 180.00 has finished too, and larger decline from 208.09 might be ready to resume.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.